Toyota (TM) has agreed to a $1.2 billion settlement over its handling of acceleration issues in Toyota and Lexus vehicles, the US Justice Department announced Wednesday. Toyota also admitted that it misled US consumers about safety issues affecting its vehicles.

ByJohn Hilliard, Staff writerMarch 19, 2014

The Toyota company logo is shown on the nose of an 2010 Toyota Prius sedan at an Englewood, Colo., Toyota dealership. Toyota has reportedly reached a $1 billion settlement deal with the US Justice Department over the company's handling of its recall of vehicles affected by an acceleration design flaw.

David Zalubowski/AP/File

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Toyota Motor Corp. will pay $1.2 billion as part of a settlement deal to avoid facing a criminal charge stemming from its handling of a 2009-2010 recall involving millions of vehicles, the US Justice Department announced Wednesday. The financial penalty is the largest of its kind ever imposed on an automaker, according to US Attorney General Eric Holder.

As part of the agreement, Toyota admitted that it misled US consumers by concealing and making deceptive statements about two safety issues affecting its vehicles which could potentially cause unintentional acceleration while on the road, the agency said.

“Rather than promptly disclosing and correcting safety issues about which they were aware, Toyota made misleading public statements to consumers and gave inaccurate facts to Members of Congress,” Mr. Holder said in a statement. “When car owners get behind the wheel, they have a right to expect that their vehicle is safe. If any part of the automobile turns out to have safety issues, the car company has a duty to be upfront about them, to fix them quickly, and to immediately tell the truth about the problem and its scope. Toyota violated that basic compact. Other car companies should not repeat Toyota’s mistake: a recall may damage a company’s reputation, but deceiving your customers makes that damage far more lasting.”

The company faced one charge of wire fraud, and if Toyota abides by the settlement's terms, the Justice Department will seek to drop the charge after three years. The agency said the settlement was the largest of its kind imposed on an automaker.

The settlement comes after an Oklahoma jury came down with a $3 million verdict against Toyota in October. In that case, the jury awarded $1.5 million to family of a woman killed in a 2007 crash involving a Toyota that went out of control, plus an additional $1.5 million to a survivor of that same crash.

The National Highway Traffic Safety Administration first began its probe into Toyotas that crashed due to stuck gas pedals in 2007, while lawmakers at congressional investigations pressed Toyota leadership on its handling of the problem.

Federal investigators traced the problems were traced back to mechanical defects, including accelerator pedals that could get stuck, as well as floor mats that could trap the pedals, according to the US Department of Transportation in 2011.

Starting in 2009, Toyota recalled nearly 8 million vehicles due to the design flaws and paid millions of dollars in civil fines.

The Justice Department settlement comes weeks after American automaker General Motors launched a much-publicized recall affecting about 1.6 million of its own vehicles, which have a flaw that could cut power while the vehicles are being driven.

Toyota also agreed to pay out a separate $1.2 billion to settle a 2012 class-action suit from vehicle owners.

The Justice Department announcement comes on the heels of another large-scale recall for the world's largest automaker. Last month, the Toyota recalled about 1.9 million of its 2010-2014 Prius hybrids sold in the US, Japan and Europe due to a software problem that can damage equipment and “in rare circumstances” cause the vehicle to lose power while it's being driven, according to Toyota.

An additional 260,000 vehicles are being recalled for a problem that can affect their vehicle stability control, anti-lock braking and traction control systems, the company said. The affected vehicles — the 2012 RAV4, 2012-2013 Tacoma and the 2012-2013 Lexus RX 350 — were sold in the US.